Freddie Mac stalls on family re-purchase of Worcester home in foreclosure

WORCESTER — Juan R. Alvarez is happy and comfortable at his home on Lovell Street surrounded by his parents and two older brothers. But the possibility of being evicted wears on his family's spirits daily.

It has been home for the 16-year-old with Down syndrome since he was 8.

His father, Juan D. Alvarez Sr., lost his job as an independent truck driver for Home Depot when the economy crashed. It didn't help that he'd bought his home at the top of the housing bubble, he said.

"No one was buying building materials anymore," he explained with the help of an interpreter from the Worcester Anti-Foreclosure Team.

The family moved here from the Dominican Republic in 2002. Mr. Alvarez, 55, said he worked long hours and was able to make his $2,100 monthly mortgage payments to U.S. Bank until he lost his job.

Though unable to collect unemployment compensation benefits because he was considered self-employed, he continued to pay his mortgage on time for the next six months until he depleted the family's savings, he said.

Then, U.S. Bank offered him a three-month trial modification that was supposed to become permanent, he said — but that never happened. After paying the mortgage under the terms of the modification for six months, Mr. Alvarez said, the family was told by U.S. Bank the modification application was denied and the bank would begin foreclosure.

In March 2011, Mr. Alvarez was back at work, but U.S. Bank foreclosed, he said. The home was then transferred to Freddie Mac, which has pursued eviction of the family. But Freddie Mac reached an agreement with Mr. Alvarez saying it would work with him and the nonprofit Boston Community Capital, which, through one of its programs, helps foreclosed residents with stable incomes repurchase their homes. The company works with banks and lawyers to stop the eviction process, buy foreclosed properties at current market values, and resell those properties to their current occupants at a significant discount off the prior mortgage value, providing them with a new 30-year, fixed-rate mortgage, according to a BCC official.

As part of the Alvarezes' court agreement with Freddie Mac, they pay a use-and-occupancy fee of $900 a month.

However, when BCC offered Freddie Mac $161,000 to purchase the Alvarezes' home to sell back to them — the amount of the last appraisal — Freddie Mac refused the offer and took the family back to court to force the eviction. The offer from BCC has sat on the table for months, Mr. Alvarez said, while the family becomes more and more depressed and anxious over the prospect of having to leave their home.

"I feel depressed," said Mr. Alvarez's wife, Maria L. Arias. "Life is unstable. We are living day-by-day and thinking tomorrow we have to go from our house. Where am I going to go?"

Freddie Mac took the family back to court for eviction a second time and won, but the Alvarezes are appealing.

"Freddie Mac had a fair market offer on the table for months that was not considered in a way that is meaningful," said Leticia Richman, staff lawyer at Community Legal Aid in Worcester, which is working with Mr. Alvarez. "During that whole process, someone (BCC) offered to purchase the property from Freddie Mac and they refused."

Under a state law passed in August 2012, Ms. Richman said it is illegal for banks to refuse to sell properties to nonprofits like BCC.

"BCC has made several offers and Freddie Mac has come back with, 'We will sell it at the higher of either the fair market value or the loan value,'" she said. "Our position as advocate is that they wouldn't ask John Smith off the street to pay what is owed on the loan. Why does the BCC have to buy it for more than the fair market value? Freddie Mac knows that BCC works with the homeowners. They are effectively saying they will not sell it to them because they are working with the owner and then price it outside of what BCC or anyone else in the market would pay for the house."

Jonathan Marien, an organizer with the Worcester Anti-Foreclosure Team, is also working with the family to help them save their home.

"They pay their use-and-occupancy every month, have an offer to buy back their home and have the financing and money to do it — he even has another approval for his son to purchase the home — but apparently Freddie Mac believes delinquent homeowners must be punished," Mr. Marien said.

Brad German, spokesman for Freddie Mac, said the company is still open to negotiation with the family.

"Our primary goal is to minimize losses to Freddie Mac and taxpayers on a mortgage that has not been paid for several years," Mr. German said. "We are under the gun to minimize losses and we have had no payment for many years."

Part of the problem, says Grace C. Ross, coordinator for the Massachusetts Alliance Against Predatory Lending, is that Freddie Mac has an "arm's length" policy that stipulates that they will not sell to anyone who has a previous relationship with the homeowners on whom they foreclosed — leaving BCC's program out of the loop.

"The 'arm's length affidavit' is active in most states," Mr. German said. "It sprang from a number of fraud transactions where homes were underbid and then resold at a higher rate of revenue and applied to the loss of the loan. Those are the transactions we intended to prohibit."

Freddie Mac, Mr. German said, is willing to consider a sale back to Mr. Alvarez or a family member as long as BCC is not involved with negotiations.

"However, those discussions need to take place directly between the Alvarez family and Freddie Mac," he added.

But, Mr. Marien said, they have been unwilling to do that thus far.

"They have been working with the BCC, have approval to buy the home, he has the money down, has the financing, paid rent the entire time, and Freddie Mac said they will not sell it back to the original family because it is against FHFA policy," he said. "Freddie Mac is 79 percent government-owned and the government gave Fannie and Freddie billions of dollars to rescue homeowners. But, for some reason, they would take a lesser amount from me to purchase the home and throw the Alvarezes out rather than sell it back to the original family."

U.S. Rep. Niki Tsongas said in a statement she is against Freddie Mac's "arm's length" position.

"I believe we should do everything possible to help responsible homeowners regain the stability and security they had in their homes," she said. "Whether that means lowering or delaying payments, getting into more stable loans at today's low rates, or providing a way out that avoids foreclosure — like a short sale, for example — supporting these individuals is in the best interest of our neighborhoods and our economy."

Ms. Ross said it is slowly changing.

"I strongly encourage families to stay and fight because we are winning in court more often than not, " she said.